Good article on assessing the INTC CC -->
June 8, 2001
Amateurs Take on Street
In Trying to Assess Intel
Can you tell the Wall Street professional from the amateur
analyst based on their assessment of Intel Corp.? Here's a test:
A) "What Intel did offer up is that (a) the second quarter is not
a meltdown and (b) in the absence of firm data to the contrary,
the company is assuming that second half will be seasonally
strong, as usual."
B) "I am worried about the apparent conflict between what Intel
is saying about sales volume and what the OEMs are saying
about sales."
C) "The Intel and AMD story will continue to roll on and it
won't be an easy fight for either one."
D) "Investor desire to own stock, and relief that expectations
haven't been cut, should sustain upward movement in the stock
for a month or two."
The preceding comments are all reactions to Thursday's
midquarter update from Intel, a much-anticipated briefing in
which the chip bellwether mainly stuck to its previous estimates
for second-quarter sales and profit margins.
Thanks to Regulation FD, individual investors could listen along
with the analysts. That's a major change stemming from the new
Securities and Exchange Commission rule, which is intended to
give all investors access to information that was once restricted
to Wall Street professionals. Intel, like most publicly held
companies, uses a technology know as Webcasting to give
equal access.
Both the professionals and the amateurs expressed some relief
that Intel's business isn't in a tailspin. And though they will be
looking for improvement in the second half of the year, there
seems to be more caution than bullishness about Intel.
What follows are samples of research notes from Wall Street
analysts and commentary from amateur investors who post on
Internet message boards. And here are the answers to the quiz.
A) Terry Ragsdale, Goldman Sachs; B) Frank Simons, a retired
lawyer; C) Quincin Gonjon, an information-systems specialist;
D) Joseph Osha, Merrill Lynch.
Analyst: Dan Niles
Firm: Lehman Brothers
Rating on Intel: "market perform"
"Intel did what was expected, which is lower revenues to
slightly below the midpoint of the old range but state that they
expected a seasonally stronger second half.
On a positive note, Intel said processors and flash were in line
with expectations, but that communications integrated circuits
were below plan. They also believe that processor inventory at
customers are at normal levels. On the negative side, Intel
lowered gross margin to slightly below the midpoint of the old
guidance but lower expenses will offset that. Amortization is
higher due to acquisitions.
The main question is how customers (such as Hewlett-Packard
two days ago) can be lowering forecasts for PC demand and
talking about increasing weakness in Asia and Europe, with
Intel not seeing it. The answer is that Intel is one step removed
from the end customer. We are curious as to what guidance in
mid-July looks like."
Name: John Fowler
Screen Name: same
Message Board: Silicon Investor
Hometown: Palm Harbor, Fla.
Other information: a 52-year-old, retired national sales manager
and Intel shareholder
"The Intel conference call was comforting. Andy Bryant said
that Intel's projections from the first quarter are very close to in
line with the way the second quarter is unfolding. My take from
this information is that Intel is doing a good job of managing
their business within a challenging marketplace.
Joe Osha, the Merrill Lynch semiconductor analyst, had implied
that Intel was making their numbers by 'stuffing the channel.'
Mr. Osha asked Mr. Bryant if customers were using processors
to build product or to build inventory. Mr. Bryant answered that
the customers knew that Intel had plenty of inventory, so it
would be very unusual of them to build inventory.
As an investor, this was important to me. Two analysts within
the last two days had suggested that Intel was shipping to
inventory, in an effort to make the numbers look good. I was
comforted to hear that this was not a new Intel practice.
Probably the most interesting part of the conference call.
I was disappointed that the call was pretty much limited to
financials. And discussion of market share, or sales of specific
products, was avoided.
In general, it was a positive conference call, considering the
challenging marketplace. Intel seems to be on track to meet
their lowered expectations, there were no major changes to
their guidance."
Analyst: Terry Ragsdale
Firm: Goldman Sachs
Rating on Intel: "market outperformer"
"Yesterday's widely anticipated Intel midquarter business
outlook update was benign, which should be sufficient to
maintain the stock's recent strength. Microprocessors (most
importantly) and flash memory are tracking to Intel's earlier
expectations, but communications integrated circuits are a bit
weaker. Intel lowered the second-quarter bar to slightly below
the middle of the earlier range, a rounding error in our minds
(though we are lowering our numbers slightly). Intel stuck to its
second-half PC seasonal strength call but admitted that this is
based on historical patterns rather than on hard current data
(like orders). New information here is sparse indeed, but
sentiment on the stock is lousy, and we like it.
Admit it: What you really wanted to hear yesterday is that Intel
has orders in hand to supply a rising number of microprocessors
going into the box build for the back-to-school PC season. Intel
did not say that, nor was it reasonable to expect it. .... Based on
current rhetoric from the major PC OEMs (admittedly
U.S.-centric), it's not at all clear what the third-quarter
back-to-school season will look like this year.
What Intel did offer up is that (a) the second quarter is not a
meltdown and (b) in the absence of firm data to the contrary
(and thus based simply on historical precedent), the company is
assuming that second half will be seasonally strong, as usual.
That's it for this round, but odds are that this will be sufficient
for the stock until second-quarter results are reported in
mid-July."
Name: Quincin Gonjon
Screen Name: CoolBreezeOne
Message Board: Motley Fool
Other information: A 32-year old information systems specialist
and investor in Intel's archrival, Advanced Micro Devices Inc.
He says he tuned in to his first Intel Webcast "to understand
why so many analysts forgive Intel's warnings."
"I must admit that I expected a lot from Intel. They of course
disappointed me entirely, and this is the first conference call I
have listened to from Intel. This quarter, Intel did not warn but I
believe that they are not being completely honest about their
revenues. It's so obvious from the conference call that Intel is
hiding something from their investors. For example, the Q&A
part of the conference call was, in my opinion just Qs without
the As. In fact, it was a complete waste of time. Intel could
have just sent out a message to all reporters about meeting their
own official estimated revenues of $6.2 billion to $6.8 billion. It
would have been less embarrassing than putting up a lame show
like they did today.
AMD is slowly gaining more and more mindshare among the
consumer market, and they will slowly penetrate the corporate
market. Intel's name is slowly losing credibility and they are
losing mindshare among their customers too. The Intel and
AMD story will continue to roll on and it won't be an easy fight
for either one, but in the end, we all win with a better product
and cheaper price."
Analyst: Joseph Osha
Firm: Merrill Lynch
Rating on Intel: intermediate-term "neutral" rating and long-term
"accumulate"
"Intel reiterated its previous targets for the June quarter. The
outlook appears unaffected (for now, at least) by the inventory
issues we highlighted. We're revising our EPS estimate up to
$0.11 for the quarter, and $0.56 for the year. We're leaving our
$0.79 EPS estimate for 2002 unchanged.
Investor desire to own stock, and relief that expectations
haven't been cut, should sustain upward movement in the stock
for a month or two.
We'd be taking profit into the rally. Valuation for the stock
appears significantly high for a company with a sustainable
earnings growth rate of 10% to 15%. We have difficulty
imagining any second-half recovery that could raise earnings,
and investor expectations, to a level sufficient to keep the stock
moving up."
Name: Frank Simons
Screen Name: f.simons
Message Board: Silicon Investor
Hometown: Playa del Carmen, Mexico
Other information: The 57-year-old retired lawyer was worried
he might not be able to connect to the Webcast from Mexico.
"The conference call went better than I thought. The highlights
for me were the reiteration of the revenue range and the
possible take-back of some market share from AMD. I am
worried about the apparent conflict between what Intel is saying
about sales volume and what the OEMs are saying about sales.
Interesting day coming up." |
